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When I enter these rules:
$IPT -A INPUT -i lo -j ACCEPT
$IPT -A OUTPUT -o lo -j ACCEPT
the iptables -L -n shows that the following line for both INPUT and OUTPUT chain
ACCEPT all -- 0.0.0.0/0 0.0.0.0/0
This would actually mean that it accept all input and output. Therefore, following rules would not be ignored. If I removed those two commands, I can't perform DNS resolution and hence, no internet. Can you help to clarify this?